NYSE Euronext let stand trades that sent American Electric Power Co. and NextEra Energy Inc. down at least 54 percent, while labeling them “aberrant” and excluding them from records showing the stocks’ lows of the day.
American Electric Power fell as much as $26.31, or 54 percent, to $22.28 a share, in the first minute U.S. exchanges were open today, according to data compiled by Bloomberg. NextEra Energy, another electricity supplier, sank as much as 62 percent to $30.37. Both stocks are listed on the New York Stock Exchange.
Trades at or below $46.03 for American Electric Power and those at or below $76.19 for NextEra Energy in the first minute of the session will be marked with an “Aberrant Report Indicator,” NYSE said in an e-mailed statement. Such a designation is used to indicate that the trade price may not accurately reflect the prevailing market for the security, according to a Securities and Exchange Commission document.
“We are continuing to try to understand exactly what happened in the first few minutes of trading in our stock this morning,” Moray Dewhurst, chief financial officer of NextEra, said in an emailed statement. “This is naturally a concern for all our shareholders and potential shareholders. This type of market behavior is not what we would expect from a well-functioning and well-regulated exchange.”
Rich Adamonis, a spokesman for NYSE, said the exchange is working on the issue. “We fully understand the company’s concerns and have been in communication with them and the SEC on the matter,” he said in an e-mailed statement.
“All we know is there was a glitch in the first 15 minutes of trading,” Melissa McHenry, an American Electric spokeswoman, said in a phone interview.
The earlier trades caused the S&P 500 Utilities Index to plunge as much as 8.1 percent today. The gauge of 31 utilities closed down 0.8 percent as of 4 p.m. New York time. NextEra is the fourth-largest company among S&P 500 utilities, with a market value of $33 billion. American Electric is the sixth at $23.1 billion, data compiled by Bloomberg show.
Shares of American Electric bounced back, closing 0.6 percent lower for the day at $48.28, while NextEra’s stock ended down 1.2 percent to $78.22.
Data vendors and other recipients of data from the NYSE were advised to leave the “aberrant” trades out of records of the day’s high and low prices.
“The NYSE notes that executions at these prices are still valid trades, but they will be excluded from the high and low data disseminated by the Consolidated Tape Association,” the New York-based exchange said.
“If the exchanges are saying they are excluding them from the tape, I would think they would cancel the trades,” Thomas Garcia, head of equity trading at Santa Fe, New Mexico-based Thornburg Investment Management Inc., which manages $80 billion, wrote in an e-mail. “This makes no sense to me, if they are going to honor the trade then it should be printed in my opinion. It was a real trade.”
The trades weren’t subject to the new system of limiting swings in individual stocks on American exchanges, a program known as limit-up/limit-down, because they came before 9:45 a.m. New York time, before the restrictions begin. The changes are going into effect gradually for stocks and will be expanded to the full trading day in August.
Under limit-up/limit-down, trades aren’t allowed to occur at more-than-specified percentages above or below a stock’s rolling five-minute average price. U.S. stock exchanges and the Financial Industry Regulatory Authority, which oversees almost 4,300 brokers, introduced curbs for individual stocks to halt shares when they rise or fall at least 10 percent in five minutes. The new system is likely to cause fewer halts, the SEC said last year.